Now that many employees have been laid off due to the coronavirus outbreak, employees and employers are wondering what happens next? This post discusses employee options and outcomes after they have been laid off for some time.
An important theme throughout these questions is the concept of constructive dismissal: when an employer unilaterally changes a significant term of employment. If the employee does not accept this change, they can claim constructive dismissal and seek severance as if they were terminated from employment.
What happens if an employee quits during a layoff?
An employee can quit their job at any time even when they are laid off. Most employment contracts will provide how much notice an employee will have to provide their employer when they resign. In a layoff scenario, an employee should still give notice of resignation as an employer could claim “wrongful resignation.” However, wrongful resignation claims are usually not worth pursuing.
Once an employee resigns, they will not be entitled to any severance from the employer. They also may not be eligible for employment insurance benefits or CERB payments because the employee was the person who terminated employment. Employees are eligible for severance and EI payments usually when they lose income through no fault of their own.
If the employee quits because the employer has significantly changed the employment relationship or has made employment intolerable, the employee could quit and claim constructive dismissal. Constructively dismissed employees will be entitled to severance pay and EI benefits.
What happens if an employee finds a new job?
Similar to the above, the employee will have to quit their job if they wish to start working at a new one. The previous employer will have no further obligations to the employee. They will not have to pay the employee any severance unless the employee claims constructive dismissal.
How long can the layoff last?
For Ontario employees under the Employment Standards Act, a temporary layoff can only last 13 weeks in any given 20 consecutive weeks until it becomes a termination.
However, if the employer continues certain payments or benefits to the employee in a layoff, then the layoff can last up to 35 weeks in any consecutive 52 weeks before it becomes a termination.
Once a layoff becomes a termination, an employee is entitled to notice of termination, payment in lieu of termination, or severance pay. This would be classified as a “termination without cause.” If the employer fails to provide enough severance pay, then the employee will have a wrongful dismissal claim. Reduced profits in an employer’s business will not decrease the amount of severance owing to an employee.
What happens when an employee is recalled?
If all conditions of employment remain the same, an employee will have to return to work on the day they are recalled. Failure to show up for work will mean that the employee will have abandoned their employment. This is effectively a resignation and the employer will no longer have to keep the employee. The employer will also not have to provide any severance pay because the employee abandoned their employment.
What happens when an employee is recalled to another position?
If the position is significantly different, the employee may claim constructive dismissal and ask for their severance. The employee will have a stronger constructive dismissal claim if the new position has more junior responsibilities or less pay.
If the position is only slightly/moderately different, the employee may still be able to claim constructive dismissal, but they may be obligated to work in this new position to mitigate their damages/severance pay.
What happens when an employee is recalled but with less pay?
Like the above, the employee may have a constructive dismissal claim depending on how much their pay or salary has been reduced, and whether it is a temporary pay cut.
The implications about whether a pay cut is legal after being recalled from a layoff are similar to when an employer reduces salary even without a layoff.
How can an employee protect their rights?
These frequently asked questions above regarding layoffs demonstrate the important of an employee preserving their right to claim constructive dismissal.
Constructive dismissal occurs only when the employee does not accept the change to their employment. However, if an employee does nothing and simply accepts a layoff/pay cut/change in position, then the employee will not be able to claim constructive dismissal.
Given the uncertainties with COVID-19, many employees are rightly hesitant to claim constructive dismissal now; while they may receive severance, they will lose their job.
One way to keep both their job and their right to claim constructive dismissal is to protest the change, or make it known to the employer that they do not accept the change permanently. This will allow an employee to preserve or protect their right to claim constructive dismissal. It will allow an employee to see whether the changes to their employment are truly temporary. If the changes became permanent, the employee may no longer have a constructive dismissal claim if they took too long to protest the changes to their employment.
Jason Wong is a Toronto Employment Lawyer practicing exclusively employment, labour, and human rights law. If you are an employee or employer who has questions about layoffs due to COVID-19, please contact Jason at jason@wongemploymentlaw.com or 647-242-5961.